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Starbucks is a specialty coffee industry, which is influenced by the five forces in the industry. These forces are competitive rivalry, bargaining power of suppliers, threat of substitutes, bargaining power of buyers, and threat of new entrants.
The company faces strong competition from other coffee companies, such as McDonald’s, and Cost coffee.
Bargaining power of the Customers
There are several factors such as the low switching cost, the small size of the individual buyers, and substitute availability which facilitates the customers in easily switching from the company to other brands. Other than that, there are also several other substitutes, such as cold drinks and instant beverages.
Bargaining Power of Starbuck’s Coffee’s Suppliers
There are several factors, such as high variety of suppliers, moderate size of individual suppliers, and large supply. It can be stated that the suppliers have a minimal impact on the Company. There are a large number of suppliers of the organization, which reduces the company’s dependency on a single supplier (Schultz, 2012). The company has made a policy to diversify its supply chain, and the size of each supplier is very less in comparison to the organization.
Threat of Substitution
The major contributors of this force is the availability of thee substitutes, low switching cost, and low cost of the substitutes. It can be critiqued that the availability of all these factors is high and the customers can easily shift to substitutes, such as beverages from the restaurants, and bottled drinks. The cost of shifting to other products is also low; therefore, the threat of substitution is very high.
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